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Memorandum № 3: the 56 changes it will bring into the life and economy of the Greeks

27 October 2012 / 21:10:45  GRReporter
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The list of serious measures included in the new memorandum, which the government will submit to be voted in parliament next week is endless. However, these measures are necessary for the release of the 31.5 billion euro tranche.

The fiscal package of measures provides for the reduction of 13.5 billion euro over the next two years, of which 10.5 billion euro will come from cost reductions and 3 billion euro from tax increases.

The main part of the measures, however, amounting to over 9.2 billion euro, has to be implemented within 2013.

Of these, cuts in salaries and pensions amount to 6.6 billion euro. What is most worrying is that the possibility that these measures won't be the last ones still remains. And this is because the Troika pressed for the Memorandum to include a clause in the event of a "bias".

As mentioned in the document, if the objectives set out in the programme for spending cuts and increase in tax revenues are not achieved, then additional measures will be taken "automatically". The text states that the new cuts will affect civil servants' salaries and pensions. On the other hand the memorandum also includes an "equivalent" clause. Thus, if the programme has a positive effect and exceeds the targets, the opportunities to assist low income groups of the population and for incentive measures for development will be explored.

In any case, with the implementation of the package of fiscal measures, the Greek economy will remain in the state of a deep recession further in 2013, estimated by the Ministry of Finance and the Troika at 4.2%.

Furthermore, the memorandum includes a number of structural changes aimed at the liberalization of markets and professions.

Both the fiscal measures and the structural changes will have to be voted by 12 November - the day on which Eurogroup will meet, as it is expected to decide whether Greece will get the next tranche.

The most important measures of the new Memorandum are:

Public sector - costs and salaries

1 Removal of allowances (1,000 euros gross per year) for public sector employees.

2 Laying off of 2,000 employees by the end of 2012. Another 25,000 employees to be made redundant in 2013 (6,250 per quarter).

3 Implementation of a uniform payroll table for the structure defining state enterprises, by establishing a ceiling on salaries of 1,900 euro per month (including insurance payments, overtime and allowances).

4 A gradual reduction of the salaries from the special payroll tables, which will take effect retrospectively from 1 August 2012. For remunerations of up to 1,000 euro, the reduction will be about 2%, for remunerations from 1,001 to 1,500 euro - 10%, for remunerations from 1,501 to 2,500 euro - 20%, for remunerations from 2,501 to 4,000 - 30%, and for remunerations of more than 4,000, the reduction will be 35%.

5 Extension to 2016 of the rule "1 appointment versus 5 lay-offs" in the state administration.

6 "Freezing" of appointments in the Ministry of Citizen Protection and a reduction of wage costs in the public sector by 151 million euro in 2013 and a further 34 million euro in 2014.

7 Reduction of the costs for salaries in local governments by 75 million euro from January 2013.

8 Removal of allowances to achieve fiscal targets and efficiency of civil servants.

9 Reduction of the number of substitute teachers from 15,226 to 2,000 per year. Also, a 90% reduction of the part-time academic staff in universities and technical colleges.

Pensions - Social benefits

1 Removal of the 13th and 14th pension for basic and supplementary pensions.

2 Increase in the retirement age by two years (also at intermediate stages) from 1 January, 2013.

3 A gradual reduction of pensions above 1,000 euro (sum total of the primary and the secondary). For pensions from 1,000 to 1,500 euro, the reduction is by 3%, from 1,501 to 2,000 euro - 5% and for pensions over 2,000 euro - 12%.

4 Reduction of the retirement lump sum compensation for state employees by 23% and imposition of a 3% contribution on basic pensions to beneficiaries since 1995.

5 Increase of contributions for insured before 1993.

6 Replacement of all family allowances and those for large families with a single allowance (depending on income).

7 Removal of pension allowances for social solidarity for those under 64 years of age.

8 Reduction of allowances for uninsured adults by 50 or 30 euro, depending on whether they have their own home.

9 Removal of the special unemployment benefits.

Fuel market

1 Liberalisation of the trade with fuels by the adoption of provisions which will allow independent petrol stations to have or to hire trucks to transport fuels.

2 Adoption of technical details for the implementation of the system for measuring input and output quantities in all stations.

3 Issuance of a ministerial decision for the installation of a GPS system.

New taxes - Tax Administration


1 The exceptional solidarity contribution will remain until 2018 and it is included in the new tax table.

2 Tax value of property to be increased from March 2013, so that sales prices are approached.

3 Increase of the tax on interest on deposits from 10% to 15% in 2014.

4 Retroactive removal of tax reliefs from the current financial year.

5 Taxation of farmers by 6% based on their revenues and expenditures.

6 Implementation of a tax on lottery games (2% to 4%).

7 Vote on legislation for the creation of a special unit of 100 inspectors for checks on large taxpayers, and a unit of 50 supervisors for the wealthy self-employed.

Health - National organization for the provision of health services

1 The merger of all funds without exception into the National Organization for the provision of health services.

2 Additional measures this year to achieve the goal of reducing pharmaceutical costs by requiring pharmacies to replace prescribed medicines with medicines which contain the same active substance, but are cheaper.

3 Limiting the services provided by the National Organization for the provision of health services and increasing the cost for private healthcare.

4 Revision of the salaries and the number of diagnostic centres the National Organization for the provision of health services cooperates with.

5 The introduction of a system with recommended prices for the recovery of medical equipment.

6 Increase of contributions paid by the insured in the Agricultural Insurance Organisation (ELGA), to the levels of the contributions coming from members of the National Organization for the provision of health services.

Trade

1 Removal of the requirement for a minimal space in order for the sale of food products to be permitted.

2 Supermarkets are allowed to sell pre-packaged meat, cheese or fish, and the sale of baby goods is liberalized.

3 The working hours of the employees of the company (as defined by Law 1037/1971 and the relevant provisions) are separated from the working hours of the company itself.

Transport

1 The price of tickets for the public transport in Athens and for the railways is increased by at least 25% from March 2013.

Energy market - State Electric Company

1 In November, the government will submit a plan to restructure the State Electric Company, on the one hand aiming at the preparation of its privatization, and on the other hand at making it competitive compared to other companies in the liberalized energy market. The plan will specify which parts of the State Electric Company will be privatized and in what timeframe.

2 The bills of the State Electric Company are increased from the beginning of 2013, except for those to the socially disadvantaged groups of the population.

3 Steps are taken to reduce the salaries of employees of the State Electric Company, as the government will present the Troika a study by a European markets specialist, in order to compare the total salary of employees in the Greek State Electric Company to the "best practices" of the European companies for the production and supply of electricity. Such a comparison will also be made with respect to the practices in the Greek private companies of the last quarter of 2012.

Investments - Privatization

1 Reduction of the Public investment programme by 300 million euro.

2 Review of the objectives in relation to privatization transactions and a reduction of the expected revenues to 25 billion euro by 2020.

Tags: Memorandum Troika package of measures Antonis Samaras Evangelos Venizelos
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